Natural Gas Prospects Growing

AUSTIN, TEXAS
— CONCERN over global warming has stimulated consumption of United States natural gas resources. And the US has plenty of gas in the ground to meet the demand.

Experts attending a conference on the role of natural gas in environmental policy last week at the University of Texas (UT) agreed that switching from coal and oil to natural gas would slow the buildup of carbon dioxide (CO2) in the atmosphere.

Though methane, CFCs, ozone, and nitrous oxides are all greenhouse gases, CO2 is expected to account for half of any global warming that occurs. Natural gas has half of coal's carbon content per equivalent amount of energy. It has one third less than oil. So it yields proportionately less CO2 when burned.

At the Rio conference on the environment in June, the US signed a nonbinding treaty to hold CO2 emissions to 1990 levels. That could be achieved by requiring industry to reduce them, or by market-based incentives such as a "carbon tax" or tradable emissions permits, says Stephen McDonald, a UT economist.

Such incentives, Dr. McDonald says, impose the least cost on the economy. But there are tradeoffs between a tax and permits. A tax imposed on the carbon content of the fuel brings income to the government. A tax collecting structure already exists. Yet emissions may remain higher than under a system of tradable permits.

Permits would require establishing a new market and regulatory structure while yielding no revenue to the government, McDonald says. (See story to right.)

Economics professor Peter Wilcoxen notes that a carbon tax of $10 per ton would add 29.5 percent to the cost of coal, but only 6.8 percent to that of gas. Utilities get 56 percent of their power from coal, 21 percent from nuclear, and 9 percent from natural gas.

IN the US, power generation is the biggest source of CO2 emissions. Robert Armstrong, who advises Texas Gov. Ann Richards, holds that utilities are reluctant to build gas-burning plants because they are relatively inexpensive and utilities are required to base their rates on the amount of their investment, rather than on how much they save. "It's time that we look for a new way to reward them for the kilowatt," Mr. Armstrong says.

Although power plants are the biggest source of CO2 emissions and the biggest potential market for natural gas, Texas is working to build a larger market for natural gas by stimulating the conversion of vehicles to natural gas. Gary Mauro, commissioner of the Texas Land Office, founded the Clean Air Texas program that mandates conversion of vehicle fleets. Mr. Mauro predicts that 1 million natural gas vehicles will travel Texas roads by 2002.

Mauro, who chaired the Clinton campaign in Texas, says Bush's energy policy was "cheap oil," but that the president-elect's is "natural gas." Under Gov. Clinton, Arkansas joined with seven other southwestern states to establish (within four years) a natural gas refueling network on interstate highways to facilitate long-range travel for natural gas vehicles.

The US has "substantial resources" to meet future demand for natural gas, notes Robert Finley, associate director of the university's Bureau of Economic Geology.

Dr. Finley worked on a National Petroleum Council report, to be released Dec. 17, that estimates the US resource base at 1,295 trillion cubic feet (tcf) of natural gas. That's a 65-year supply at current consumption levels. But 486 tcf are difficult-to-extract resources like gas held in "tight sand" formations or coal seams. It will take advanced technology to convert those resources to producible reserves, Finley says. Another 413 tcf are thought to exist in conventional fields that haven't been discove red yet. Proven reserves are 160 tcf. An important source will be reserve growth within existing fields, Finley says. The NPC estimates those at 236 tcf.

GEOLOGISTS used to think that few wells were needed to drain the gas from a field, but some fields have far more complex structures than previously thought, Finley says. For instance, the gas-bearing rocks in the Stratton field in south Texas are not one solid mass, but are more like discrete strands of spaghetti in a bowl. A needle stuck into the bowl only hits some strands.

After realizing this, the operators of the 50-year-old field reversed its declining output by drilling into previously untapped reservoirs, Finley says. New reserves in old fields will be particularly important in Texas, which has already produced 300 tcf of gas and still leads the nation in production and reserves. Small companies that are now doing most of the onshore exploration are adopting advanced technologies such as 3-D seismic techniques.